NYTimes.com
High Rice Cost Creating Fears of Asia Unrest
Saturday March 29, 7:37 pm ET
By KEITH BRADSHER
HANOI -- Rising prices and a growing fear of scarcity have prompted
some of the world's largest rice producers to announce drastic limits
on the amount of rice they ex****t.
The price of rice, a staple in the diets of nearly half the world's
population, has almost doubled on international markets in the last
three months. That has pinched the budgets of millions of poor Asians
and raised fears of civil unrest.
Shortages and high prices for all kinds of food have caused tensions
and even violence around the world in recent months. Since January,
thousands of troops have been deployed in Pakistan to guard trucks
carrying wheat and flour. Protests have erupted in Indonesia over
soybean shortages, and China has put price controls on cooking oil,
grain, meat, milk and eggs.
Food riots have erupted in recent months in Guinea, Mauritania,
Mexico, Morocco, Senegal, Uzbekistan and Yemen. But the moves by rice-
ex****ting nations over the last two days -- meant to ensure scarce
supplies will meet domestic needs -- drove prices on the world market
even higher this week.
This has fed the insecurity of rice-im****ting nations, already
increasingly desperate to secure supplies. On Tuesday, President
Gloria Macapagal Arroyo of the Philippines, afraid of increasing rice
scarcity, ordered government investigators to track down hoarders.
The increase in rice prices internationally promised to put more
pressure on prices in the United States, which im****ts more than 30
percent of the rice Americans consume, according to the United States
Rice Producers Association. The price that consumers pay for rice has
already increased more than 8 percent over the last year.
But the United States is fortunate in also ex****ting rice; poor
countries ranging from Sengal in West Africa to the Solomon Islands in
the South Pacific are heavily dependent on im****ts and now face higher
bills.
Vietnam's government announced here on Friday that it would cut rice
ex****ts by nearly a quarter this year. The government hoped that
keeping more rice inside the country would hold down prices.
The same day, India effectively banned the ex****t of all but the most
expensive grades of rice. Egypt announced on Thursday that it would
impose a six-month ban on rice ex****ts, starting April 1, and on
Wednesday, Cambodia banned all rice ex****ts except by government
agencies.
Governments across Asia and in many rice-consuming countries in Africa
have long worried that a steep increase in prices could set off an
angry reaction among low-income city dwellers.
"There is definitely the potential for unrest, particularly as the
people most affected are the urban poor and they're concentrated, so
it's easier for them to organize than it would be for farmers, for
example, to organize to protest lower prices," said Nicholas W. Minot,
a senior research fellow at the International Food Policy Research
Institute in Wa****ngton.
Several factors are contributing to the steep rice in prices. Rising
affluence in India and China has increased demand. At the same time,
drought and other bad weather have reduced output in Australia and
elsewhere. Many rice farmers are turning to more lucrative cash crops,
reducing the amount of land devoted to the grain. And urbanization and
industrialization have cut into the land devoted to rice cultivation.
In Vietnam, an obscure plant virus has caused annual output to start
leveling off; it had increased significantly each year until the last
three years.
Until the last few years, the potential for rapid price swings was
damped by the tendency of many governments to hold very large rice
stockpiles to ensure food security, said Su****l Pandey, an
agricultural economist at the International Rice Research Institute in
Manila.
But those stockpiles were costly to maintain. So governments have been
drawing them down as world rice consumption has outstripped production
for most of the last decade.
The relatively small quantities traded across borders, combined with
small stockpiles, now mean that prices can move quickly in response to
supply disruptions.
At the same time, prices set in international rice trading now have an
increasingly im****tant effect on prices within countries. This has
been particularly true in an age of Internet and mobile phone
communications when even farmers in remote areas can learn about
distant prices and decide whether their own buyers are giving them a
fair price.
Even before governments imposed restrictions this week, trading
companies in ex****ting nations had become increasingly reluctant to
sign contracts for future delivery as they wait to see how high prices
will go.
"The market has pretty much ground to a halt for the past few weeks,"
said Ben Savage, the managing director for rice at Jackson Son &
Company, a commodities trading firm in London. Soaring prices are
already causing hard****p across the developing world.
In a crumbling covered market in an old neighborhood of Hanoi, Cao
Minh Huong, a ceramics saleswoman, said that rising food prices,
especially for rice, were forcing her to change her diet. "I'm
spending the same amount on food but I'm getting less," she said.
Together with rising prices for other foods, like wheat, soybeans,
****k and cooking oil, higher rice prices are also contributing to
inflation in many developing countries. Retail rice prices have
already jumped by as much as 60 percent in recent months in Vietnam,
trailing increases in wholesale prices but leading a broader
acceleration in inflation. Prime Minister Nguyen Tan Dung of Vietnam
announced Wednesday that the government's top priority now was
fighting inflation. Overall consumer prices are more than 19 percent
higher this month than last March. . The inflation rate has nearly
tripled in the last year.
Rice is unusual among major agricultural commodities in that most of
the major rice-consuming countries are self-sufficient or nearly so.
Only 7 percent of the world's rice production is traded across
international borders each year, according to figures from the United
Nations Food and Agriculture Organization in Rome.
Nguyen Van Bo, the president of the Vietnam Academy of Agricultural
Sciences, which oversees government farm research institutes, said in
an interview that the government expected rice production to rise
further by 2010 despite the rapid expansion of residential housing and
factories into what had been prime rice-growing land. But the
government needs to train farmers to alternate corn with rice to
defeat rice pests like the virus, he said.
Vietnam, Egypt and India all limited rice ex****ts last year, but the
limits were much less drastic and were imposed much later in the year,
after much more rice had been ****pped.
The government of Thailand, the world's largest rice ex****ter followed
by Vietnam, has not yet limited ex****ts. But a national debate has
started in Thailand over whether to do so ,and Thai ex****ters have
already practically stopped signing delivery contracts, Mr. Savage
said.
Even before Friday's ex****t restrictions by Vietnam and India, bids
for commonly traded grades of Thai medium-grain rice had doubled this
year to $735 a metric ton. Vietnamese medium-grain rice had almost
doubled to more than $700 a ton, with most of the increase coming in
the last four weeks. Bids jumped as much as $50 a ton on Friday.
Governments have been reluctant to tell farmers to sell their rice at
low fixed prices, for fear that farmers would hoard rice or not bother
to grow as much as they could. On Friday, China, which is virtually
self-sufficient in rice, raised the minimum prices for rice and wheat
that it guarantees to farmers.
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